Before speaking to Joseph Stiglitz, a member of his surprisingly large team asks if I can share my questions with him. It turns out that the Nobel laureate appreciates the time spent on his preparation. Stiglitz’s critics might laugh: hasn’t this been three decades in the making? Doesn’t his left-wing critique of the free market come naturally?
Stiglitz, chairman of Bill Clinton’s council of economic advisers and then chief economist at the World Bank in the 1990s, rose to fame with his blockbuster attack on the IMF in 2002, Globalization and its discontents. Disdained by The Economist, it has nevertheless become for many leftists THE economist.
Some things have changed. At 81, Stiglitz finally feels in an ascendant position. Skepticism about trade rules has now become received wisdom among Democrats and Republicans. “Where I was in 2000 on globalization is really where the world is today,” he says jovially and seemingly spontaneously. Even the IMF has taken his criticisms into account.
U.S. President Joe Biden has adopted pro-worker state policies that Stiglitz endorses. Stiglitz also claims justification for falling inflation. In November, he took a “victory lap” on behalf of economists who, like him, argued that rising prices were a “transitory” response to supply chain problems.
“If you had done nothing other than normalize interest rates at 3, 3.5 or 4 percent, current inflation would be little different than it is.” US consumer inflation was slightly higher than expected in March. “There will inevitably be variations from month to month. . . [But] Inflation fell dramatically – as the “transitional team” predicted – without unemployment rising as the other team thought necessary.
But the new world order also poses challenges to Stiglitz’s worldview. He called for a better solution, both for the world’s poor and for the deindustrialized regions of the West: the needs of the two are often contradictory. The United States wants to create green industrial jobs by producing electric cars and solar panels, but deplores that Chinese imports present unfair competition.
Is China a constructive player in global trade? “In many ways, because of the opacity of their system, we don’t really know.” The “irony” is that since 2019 the United States has blocked the appointment of new judges to the WTO appellate body, the highest court of appeal for global trade, “we have not so no formal legal way to say whether they violated the rules or not.” .
The underlying problem is that the United States did not foresee a rival like China, Stiglitz explains. Even without subsidies, China “could compete simply on the scale of its economy and the number of engineers it has.” Our underinvestment in engineering and their overinvestment in engineering – it’s not a business violation, it’s a strategic mistake. They gave themselves a comparative advantage and we did not accept that.”
For Stiglitz, China’s success in electric vehicles also proves that when it comes to climate policy, regulations often work better than subsidies. More than ten years ago, “I was in a meeting with the Prime Minister [Wen Jiabao] where he told automakers: you have to be electric within five years or you’re out of here. China has made it clear that it will be an electric vehicle country; We did not do it.
So is Stiglitz in favor of the return of industrial jobs to the country? “The pandemic has made it very clear that we do not have a resilient economy and that borders are important and whatever our agreements are, when push comes to shove, we will put our citizens first.
Another Nobel laureate, Angus Deaton, recently put forward the idea that leaders of rich countries must prioritize their own citizens over the world’s poorest populations. Stiglitz disagrees: if the West prioritizes its own population, it will fail to encourage global cooperation, for example on climate change. “We can implement industrial policies in which there is more sharing of green technologies. »
Stiglitz likes the slogan “reduce risk”: concentrating high-end chip production “on a single island, Taiwan, is madness.” Republicans’ protectionism comes from seeing the world as “zero-sum,” while Democrats fear that gains from trade will be absorbed by businesses, not workers. Additionally, “Democrats still believe in a rules-based system, they just don’t think China plays by the rules, and they’re trying to figure out what kind of rules-based system can work in a world where there is has so many things.” heterogeneity”.
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Stiglitz’s new book, The path to freedom, seeks to recover the idea of freedom from the American right. The United States, he points out, was born from the idea of no taxation without representation. Some citizens now seem to reject the concept of taxation even with representation.
Freedom is not something that can be easily maximized, as libertarians would like. This involves trade-offs: a person’s freedom to carry a gun restricts many children’s freedom to go to school; The freedom of a pharmaceutical company to charge what it wants conflicts with the freedom to live of patients.
The right’s inability to grasp such compromises constitutes its “fundamental philosophical flaw,” writes Stiglitz. This has created an unequal and dishonest society, which is partly embodied by Donald Trump: Trump University, the for-profit school he founded, was, like many American businesses, built on exploitation; Trump himself, like many rich kids in the United States, believes he has the right to break society’s rules.
Populism is stronger in countries like Brazil, the United States and Hungary, which have not addressed the issue of inequality, says Stiglitz. The stagnation of living standards and the resulting loss of hope creates “a fertile field for [a] demagogue like Trump. . . This is what neoliberalism produces.
Stiglitz shared the 2001 Nobel Prize for his work on how imperfect information affects markets, but he didn’t think that applied to people deliberately creating misinformation. “We hadn’t fully considered how mean people could be!” I might know something, I would keep it to myself, but there were laws against fraud and we had scientific principles, you couldn’t lie.
Stiglitz’s solutions often suggest that the United States should be more like Europe: online regulations, sick pay and paid leave. Why does the United States continue to outperform Europe in growth and technological innovation? His answer is twofold. First, the American growth figures are flattered by demographic developments. “Once you correct for some of the demographics, we don’t do very well.” Second, GDP is not enough. “We are failing. Our life expectancy is decreasing. The data on unhappiness – we’re down. Overall, “if you were a typical citizen, would you rather end up in Sweden or the United States?” The answer is unambiguous. It won’t be the United States.
Silicon Valley’s potential is real, but “a lot of it,” he says, depends on support from government and nonprofit universities like Stanford and Berkeley. Anyway, “this [tech] The world is the antithesis of the Trump world. He wanted to reduce research expenses.
However, the government is under pressure: the debt/GDP ratios of Western countries have increased. Is Stiglitz worried? Not about the United States. “The growth rate over the last 100 years has been much higher than the real interest rate, which is really the crucial variable for debt sustainability. Investing in infrastructure by raising taxes would also boost growth,” he says.
The eurozone, where countries cannot print their own currencies and have less room to raise taxes, is different. “It’s hard not to worry about the Italian debt, for example.”
Stiglitz economics had a brief moment in Argentine politics. A Stiglitz protégé, Martín Guzmán, was named economy minister in 2019. He called for restructuring Argentina’s debt burden, but ended up resigning in 2022, unable to garner support for debt reductions. expenses. What are the lessons? “We cannot separate economics from politics. . . But for the world as a whole, the lack of a [sovereign] the bankruptcy proceedings are truly a crucial failure.” Stiglitz also cited approvingly Chile’s left-wing president Gabriel Boric, whose ideas have also been strongly realized.
The path to freedom is striking in its moral disgust at the “selfishness,” “materialism,” and “dishonesty” of neoliberal capitalism. Stiglitz complains about airlines that lose luggage, unreliable phone networks, call centers that keep you on hold for hours. It’s clearly personal. “We were talking this weekend about how many people we all know, especially older people, are facing the problem of scams. . . Much of our life must be spent defensively, which is actually very unpleasant.
He derides his economist rivals as “cognitive dissonance: you spend your life proving that markets are efficient, and then you spend the rest of your life dealing with the obvious inefficiencies of the market economy.”
I wonder if the same cognitive dissonance applies to him. He asserts that “for the most part, market income has no moral legitimacy.” Is it the same for your own income?
He answers the question with good humor. “The salaries we all receive cannot be justified from a moral point of view. Some of the things I do could generate billions of dollars for someone else. How much of this is attributable to what I did? I don’t even know how to think about it. He knows that “people who work very hard, in very unpleasant jobs, do not receive a salary that compensates them” compared to others. The U.S. federal minimum wage is “the level it was 65 years ago, adjusted for inflation.” It’s almost unbelievable. Some things should change, even if Stiglitz himself remains constant.
